Kansas aviation suppliers and exporters say reauthorization of the nation’s Export-Import Bank is crucial to their business. Opponents call it corporate welfare.

Spirit AeroSystems say reauthorization of the Export-Import Bank is crucial to the sale of Boeing airplanes overseas. Without the bank’s renewal, business will be hurt, officials say.
Jaime GreenThe Wichita Eagle

FILE Production work on Beechcraft planes takes place inside the company's plant IV. (June 26, 2013) Beechcraft has turned to the Export-Import Bank to assist with foreign sales.
Travis HeyingThe Wichita Eagle

Clearwater Engineering, a small aviation supplier near Wichita, is keeping a close eye on a key decision in Washington — whether Congress will reauthorize the Export-Import Bank next month.

The Depression-era program helps companies that depend on exports by guaranteeing loans and providing credit insurance to overseas buyers of American products.

The agency’s charter is set to expire Sept. 30 unless Congress approves reauthorization. The bank is facing stiff opposition from some Republicans in the House and Senate, urged on by conservative groups who want it eliminated.

Supporters include area Boeing suppliers such as Spirit AeroSystems and Clearwater Engineering, who, along with other local exporters, are contacting members of the Kansas delegation to urge passage of legislation that would let the bank continue to operate.

Boeing work makes up 65 percent of Clearwater Engineering’s business, said Mike Hakonsson, Clearwater Engineering’s director of contracts and marketing.

With Boeing’s record orders and rising production rates, the company has aggressive growth plans.

In October, it’s moving to Derby, doubling its space and adding to its staff of 27.

“Boeing’s business is very important to us,” Hakonsson said.

Without the Ex-Im Bank, U.S. companies are at a disadvantage when they compete with countries that boost sales through their own versions of the Ex-Im Bank, Hakonsson said.

“When Boeing creates a sales forecast and they start growing, so do their suppliers,” he said. When exports decline, so will suppliers’ business.

It’s not only a Boeing issue, however.

Last year, the bank approved 3,842 requests for assistance with U.S. companies valued at $37.4 billion, according to its annual report.

Nearly 90 percent of its transactions were to small businesses.

Dozens of Kansas companies — general aviation planemakers, agricultural equipment suppliers, crop producers, oil and gas extractors and a variety of manufacturers — turn to the Export-Import Bank for help securing overseas sales.

Last year, 32 Kansas exporters used its services to support $493 million in exports. Half were small businesses.

For the seven years from 2007 to 2014, the bank assisted 62 Kansas exporters, including 38 small businesses, in support of $1 billion in exports.

The top export destinations for Kansas exporters using the Ex-Im Bank were South Africa, India and Mexico.

Supporters, which include a broad range of business and trade groups, say the bank’s demise will jeopardize billions of dollars in sales of goods in a variety of sectors.

They argue that the Ex-Im Bank levels the playing field for American companies vying for foreign business.

Opponents call it a subsidy, crony capitalism and corporate welfare.

What Ex-Im does

The bank’s credit insurance provides payment coverage for commercial risks, such as buyer default, and political risks, such as war. It allows exporters to sell on “open account” terms, instead of requiring cash-in-advance or letters of credit, the bank says. Businesses won’t forego sales because they can’t match credit terms offered by global competitors, the bank said.

It also helps U.S. companies get loans to fill export orders with a guaranteed line of credit that can be used to buy finished products, raw materials, supplies, labor or overhead. And it extends financing to foreign buyers of U.S. goods and services.

Rep. Mike Pompeo, R-Wichita, voted against reauthorization in 2012. Pompeo has not yet decided how he will vote next month, his office said. Republican Sens. Jerry Moran and Pat Roberts voted in favor of the bank in 2012.

The bank is important to many Kansas employers and is responsible for job growth in Kansas, Roberts said in a statement. But he said the program needs to be reformed.

“We shouldn't reauthorize simply because it is the easiest path forward,” Roberts said. “Rather, we must take into consideration the risk to every taxpayer and craft a more free enterprise system that benefits all our small, medium, and large businesses making products in America. My vote will largely depend on what reforms are added and whether it alleviates my skepticism about the bank's current functionality."

Pompeo agreed that the nation’s and Kansas’ economy depends on its ability to trade freely and fairly.

“When our companies and workers have the ability to compete on the world stage, they will grow and thrive,” Pompeo said. “While the Ex-Im Bank has historically played a role our export economy, Congress must reevaluate how to best promote exports without placing taxpayer dollars at risk. I look forward to working with my colleagues to find the conservative, common-sense solutions both our workers and taxpayers deserve.”

Supporters say the bank levels the playing field. Most countries that rely or want to promote exports have similar programs – or programs with the same aims. More than 60 countries, including China, Russia and France, have their own export credit agencies, and those agencies will step in to support their countries’ businesses if the Ex-Im Bank closes, they say.

“There are countries that provide ... subsidies to our competition,” said Gary Plummer, president and CEO of the Wichita Metro Chamber of Commerce. “The Ex-Im Bank is one tool that can be used to try to level that playing field.”

Plummer went to Washington D.C. in the spring to meet with members of the Kansas delegation. Conversations are ongoing, he said.

“It should pass because it doesn’t cost (taxpayers) anything,” Plummer said. “It should be a no-brainer. But it may get wrapped up in other politically charged issues that keep the Democrats and Republicans from finding common ground.”

That’s probably its biggest threat, Plummer said.

Karyn Page, president and CEO of Kansas Global Trade Services, said the Ex-Im Bank provides a service when traditional lending institutions won’t.

Bankers are concerned about risk, she said, and transactions across borders can carry geopolitical factors over which they have no control.

The Ex-Im Bank isn’t part of all export transactions.

“But I think that we should have good tools in our toolbox available for our companies who want and need to export,” Page said.

Of all the issues to oppose, she said, “the one that puts money back in the Treasury, shouldn’t be the one.”

Without the help when it’s needed, “foreign buyers will just choose someone else,” Page said. “If Ex-Im is not reauthorized, it will be painful.”

Spirit AeroSystems agrees.

Hundreds of Boeing suppliers depend heavily on international sales of Boeing commercial aircraft.

“Every airplane that Boeing sells equates to another airplane that we get the opportunity to build at Spirit, so there’s a direct impact to the workforce and jobs, both at our company and in our supply base,” Debbie Gann, Spirit AeroSystems vice president of communications and corporate administration, said in an e-mailed statement.

It’s too soon to say when the industry would start to feel the impact if the bank is eliminated, Gann said.

“But there is no doubt there would be harmful consequences if we are unable to maintain a level playing field for American exporters,” she said.

Heritage Action for America, a conservative Washington, D.C., group that supports limited government, sees it differently.

It opposes the bank, calling it corporate welfare for big business.

“We're up against a massive, well-funded lobbying effort from big business and elites in Washington that don't want to let go of their taxpayer-funded subsidies,” the group said in an e-mailed statement. “But we're confident that the bank will expire in September if Congressmen listen to their constituents.”

In a free-market system, businesses should compete based on the quality of their products and services, it said.

The bank’s contribution to U.S. exports is negligible, the group said. Ninety-eight percent of the nation’s exports aren’t backed by the bank.

Textron’s stance

Cessna Aircraft and Beechcraft Corp., part of Textron Aviation, has turned to the Ex-Im Bank for assistance in some cases.

In 2013, Cessna received $36.9 million in disbursements to support $46.7 million in export sales, according to the bank.

Beechcraft received disbursements of $7.8 million to support $13.4 million in sales last year.

The Ex-Im Bank was especially crucial during the 2008 to 2010 time frame when commercial credit was tight, said Michael Thacker, Textron Aviation senior vice president of engineering.

It was critical to complete some of Cessna and Beechcraft’s export sales, Thacker said.

“In many cases, there weren’t other credit facilities available,” Thacker said. “The credit market has improved a little bit for us. But the Ex-Im Bank is there when commercial credit is not for one reason or another.”

The planemaker used the bank in only in a handful of deals, but those sales wouldn’t have happened without its support, Thacker said.

The aviation industry has been hard hit by the economy, and each sale is important, he said.

The bank is a vital tool for competing in a global market, and reauthorization is critical, Thacker said.

“The U.S. is not the only government that has export credit facilities available,” Thacker said. “When you’re competing on the global stage, you need to make sure you have financing available to those end customers.”

Beyond aviation

Great Plains Manufacturing in Salina builds agriculture implements. More than 1,500 of its 1,700 employees are in the Salina area.

And more than 10 percent of its sales are to overseas customers.

A recent international dealers meeting drew 104 attendees from 22 countries. About two-thirds of them didn’t speak English. They used translators to communicate.

“We have a very strong export business,” said James McNair, the company’s international controller.

The availability of the Ex-Im Bank increases Great Plains’ willingness and ability to export, McNair said.

If the customer doesn’t pay, then the Ex-Im bank will go through Australia’s legal system to secure payment.

“We haven’t had to file a claim,” he said.

Within the next five years, Great Plains plans to grow its international business to more than a third of its sales.

“There’s a lot of countries that really need our technology to increase their yields,” McNair said.

Retention of the Ex-Im Bank will help it meet its goals.

“I don’t pretend to be a politician,” McNair said. But “this has been a tool that Americans have had to help develop their markets for over 80 years. ... It seems like it’s a worthwhile endeavor. It’s about American jobs.”